Midland-Odessa economy nears end of 2011 at new record levels

Mella McEwen

Published 3:08 am, Tuesday, January 3, 2012

Perhaps sensing that the 2011 finish line was at hand, the combined Midland-Odessa economy increased the pace of its growth in November, showing stronger-than-expected month-to-month gains from October to November.

Having shown signs of flattening, the Midland-Odessa Regional Economic Index actually surpassed its previous high reached in December 2008 and is 13.6 percent stronger than November 2010. The Texas Permian Basin Petroleum Index also surpassed its previous high reached in September 2008 and is up 13.9 percent from November 2010.

"Both took larger-than-normal monthly leaps from October to November that propelled them past their prior peaks," said Karr Ingham, the Amarillo economist who prepares both indexes for the Midland Development Corp. and Security Bank. The indexes represent the general Midland-Odessa economy and the region's oil and gas economy, and the fact that both are back in record territory is a game-changer, he said.

"It made perfect sense for the indexes to slow down," he said.

But crude oil prices began an increase of $10 to $12 a barrel, and that gave a boost to the area's oil and gas economy, which found its way to the general economy. Ingham put the value of the crude produced in West Texas at $23.47 billion so far this year, up 27 percent from $18.4 billion a year ago. That is cash flow spent by oil and gas operators on everything from payrolls to office rent, automobiles to catering, he said.

The business community -- including builders, support companies and retail -- is strong said Bobby Burns, president and chief executive officer of the Midland Chamber of Commerce. He attributes that to the area's positive business climate.

"In the rest of the nation, we're an aberration and proud of it," he said.

"We all know oil and gas is the heart and soul of the economy and that's unlikely to change," he said.

Burns sees development throughout the city, including residential subdivisions, new office buildings, retail around Loop 250, restaurants and the new Cinergy Cinemas theater and entertainment complex. There are even plans for downtown, he said.

Consumer spending is driving the growth in the Midland-Odessa index, Ingham said. Spending is at record levels with November figures 20 percent above last November and year-to-date numbers 25 percent above the same period of 2010. Spending for 2011 is up about 12 percent compared to the previous peak spending in 2008, he said. The other component of consumer spending -- automotive spending -- remains slightly below the 2008 peak. Ingham said November spending was up 41 percent over November 2010, which was up 58 percent over November 2009 spending.

Construction activity also is strong, he said. Building permit valuations are up 28 percent with housing construction at record levels. There were 807 permits issued so far in 2011, which was the highest number recorded since at least 1995, when data for the index began to be collected.

Like most other metropolitan areas, Midland and Odessa are seeing existing home sales lag behind previous peak levels reached in 2006-07, Ingham said. The cities are bucking state and national trends because housing prices continue to increase, he said. November prices dipped 5 percent compared to last November, but prices year-to-date are up 7.2 percent. "No one in Texas is losing value," Ingham said. "Prices are either flat or there's a modest increase, nothing like the prices and dollar volumes in Midland-Odessa."

Put all those sectors into the mix, he said, and "the aggregate economies of the combined Midland-Odessa metro area is in new record territory and arriving with considerable momentum upward to end 2011 strong and carry that strength into 2012."

Though the national economy appears to have pulled back from the brink of a second recession, Ingham said there still are question marks -- including the economic health of European countries. A strengthening national economy is good for Texas and Midland-Odessa, and the impact of a strengthening economy on energy demand is particularly good for Midland-Odessa, he said.

Burns said he and the rest of the chamber staff anticipate a strong 2012 and, like Ingham, see the economy entering the new year with upward momentum.